Sales and Use Tax Annotations

Annotation 330.3775

(c) CONTINUING SALE AND PURCHASE

330.3775Termination of a Lease. A lease ceases upon the earlier of repossession of leased property by the lessor or the time the lessor sells its ownership interest in the property and not by the contract definitions in the lease contract. The reason for this is that the lease for sales and use tax purposes is defined by the sale and use tax law and not by contract definitions. While the direct definition of lease in section 6006.3 simply recites that "lease" includes rental, hire, and license (with one specific exclusion), section 6006.1 defines continuing sale to be "granting of possession of tangible personal property by a lessor to a lessee . . . " Therefore, the Revenue and Taxation Code focuses intention upon the granting of possession. Accordingly, the lease continues while the lessee retains possession with the acquiescence of the lessor. 12/19/80.

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